Presented by Niranjan Swain

Corporate Tax Planning Money Saved is Money Earned

A presentation by Niranjan Swain,

OPGCL,Bhubaneswar
A “TAX” IS A “FINE”
FOR DOING WELL

A “FINE” IS A “TAX”
FOR DOING “WRONG”.
 Tax Planning - Legislative Right

Position of MAT over various

years

A presentation by Niranjan Swain,

OPGCL,Bhubaneswar
 What is the relation?

Income Tax Dept. Tax Payer

Income Tax Act

Income Tax Rules

Increase in CBDT Circular / Notification/ Reduce

Instruction
tax tax
Jurdicial Pronouncements burden
collection
Retrospective amendments

A presentation by Niranjan Swain,

OPGCL,Bhubaneswar
 What is Tax Planning ?

 Exercise carried out by a tax payer

to meet his tax obligations in a
 proper, systematic and orderly
manner
 availing
 all permissible exemptions,
 deductions and
Tax Planning  relief under the statute as may be
applicable in its case
 not taking form of “colourable
devices” and
 having no intention to deceit the
legal spirit behind the tax law

A presentation by Niranjan Swain,

OPGCL,Bhubaneswar
 OBJECTIVE OF TAX PLANNING

Reducing tax Avoiding

incidence litigation

Objective

Productive Progressive
investment economy
 Tax Planning
[McDowell & Co. Ltd. v. CTO [1985] 154 ITR 148
(Supreme Court)]

 Colourable devices cannot be part of tax planning and

it is wrong to encourage or entertain the belief that it
is honourable to avoid payment of tax by resorting to
dubious methods
 What is Tax Avoidance ?

 Planning to reduce or negating

tax liability legally permissible
ways
 takes into account loopholes of
law
Tax Avoidance  Tax hedging within frame work
of law
 Intentional tax planning before
actual tax liability
It has legal sanction
 The line of demarcation
between tax planning and tax
avoidance is very thin and
blurred.
A presentation by Niranjan Swain,
OPGCL,Bhubaneswar
 What is Tax Avoidance ?

 Criteria to define tax avoidance

 (1) use of colorable devices;
 (2) instances where doctrine
of substance is defeated;
 (3)defeating the genuine spirit
of law;
Tax Avoidance
 (4)mis-representation or
twisting of facts;
 (5)taking only strict
interpretation of law and
suppressing the legislative
intent behind it.

A presentation by Niranjan Swain,

OPGCL,Bhubaneswar
 What is Evasion ?

 Tax liability is illegally

avoided
 Attempted with help of
unfair means / methods
 Tax omission
Tax Evasion  Unlawful
 Punishable under law
 intensional

A presentation by Niranjan Swain,

OPGCL,Bhubaneswar
 Tax Planning

 Tax planning should not be done with an intent to

defraud the revenue; though all transactions entered
into by an assessee taken individually could be
legally correct, yet on the whole these transactions
may be devised to defraud the revenue

 Thus, planning for tax should be correct both in form

and substance
Areas of Tax Planning

 Management Decisions
 Tax Computation
 Tax Compliance
 Tax Payments

A presentation by Niranjan Swain,

OPGCL,Bhubaneswar
 What the job of Tax Planner ?

 Determination of most tax effective structure.

 Taking full advantage of tax opportunities and
reliefs
 Achieving the optimum capital or revenue tax
treatment
Tax Planner  Reducing tax on disposals and maximising relief on
acquisitions
 Making the most of tax opportunities specific to
your industry
 Meeting the rigorous demands of compliance
including corporation tax self assessment
 Acting on your behalf in discussions with the tax
authorities
A presentation by Niranjan Swain,
OPGCL,Bhubaneswar
Tax Planning – Salary
Component Break Up
A Basic
B Supplementary Allowances
HRA
Medical Reimbursements
LTA
Components of Supplementary Children Education
Allowance Children Hostel Subsidy
Conveyance Allowance
Professional Development Allowance
Balancing Figure
C Retirement Benefits
D Performance Pay
CTC

11/16/2015 A presentation by DGM(F) OPGCL 15

 Salary – Structures - Pictorial Structure
. Benefits Market Structure Benefits

40% TFP (Total Fixed Pay which does not

Basic Pay
include Variable Pay)

Retirals Provident Fund - 12% of Basic

Gratuity - 4.81% of Basic
Supplementary Allowance CTC - ( Basic + Retrials + Variable Pay)
As per CTC
E6 - 19%
E5 - 18%
Performance Pay E4 - 16%
E3 - 15%
E2 - 12%
E1 - 8%
11/16/2015 A presentation by DGM(F) OPGCL 16
 Tax Planning – Salary Income

 Consolidated Salary Vs. Break up salary

 Deduction vs. Exemption
 HRA Vs. Accommodation / Self Leasing
 Commuted pension vs. Uncommuted Pension
Planning  Contribution to PF, Gratuity, Pension etc.
 Medical Allowances, Reimbursements and
facilities.
 Education Allowances, Reimbursements and
Facilities.
 Tax free perquisites - benefits
 Provision of – Computes / laptops, Vehicles /
movable assets / Electronics assets etc.
 Tax Relief u/s 89.
A presentation by Niranjan Swain,
OPGCL,Bhubaneswar
 Tax Planning – House Preoperty Income

 House Property Income Vs. Business Income

 Self Occupies Vs. Let Out / Deemed Let Out
 Registered Owner Vs. Deemed Owner
Planning  Deduction u/s 23 – On Payment
 Deduction u/s 24 – Source of Borrowing
 Purchase of House in name of Spouse /
Transfer of House to Spouse / Gift to Spouse
 Transfer of House Property to spouse
without consideration.

A presentation by Niranjan Swain,

OPGCL,Bhubaneswar
 Areas of Tax Planning?

 Selection of type of industry,

location of industry etc.
 Corporate mergers /
amalgamations.
Management decisions
 Procurement / acquisitions of
Fixed assets.
 Make or buy,
 own or lease,
 retain or replace,
 export or domestic sale,
 shut down or continue,
 expand or contract .
A presentation by Niranjan Swain,
OPGCL,Bhubaneswar
 Areas of Tax Planning?

 Claiming appropriate exemptions.

 Claiming deductions under respective
heads of income.
Tax Computation  Revenue and Capital
 Booking of Expenses in appropriate Head
of Accounts.
 Capitalization of Assets.
 Claiming deduction in respect of
Depreciation / addl. depreciation etc.
 Advantage of unabsorbed depreciation.
 Bad Debts – Tax Benefits

A presentation by Niranjan Swain,

OPGCL,Bhubaneswar
 Areas of Tax Planning?

 Compliance with the provisions of:

 u/s 40(a)/ 40(a)(i) / 40(a)(ia) – TDS
Tax Computation  Income Tax -40(a)(ii)
Additional Condition  Perquisite Tax –40(a)(v)
 Compliance with the provisions of:
 Payment to Relative – 40 A(2)
 Cash Payment – 40 A(3)
 Provision of Gratuity -40A(7)
 Contribution to Non Statutory Fund-40
A(9)
 ComCompliance with the provisions of:
 Un paid Liabilities – 43B
A presentation by Niranjan Swain,
OPGCL,Bhubaneswar
 Areas of Tax Planning?

 Computation of Business / Profession

Income – Special Provisions
Tax Computation  Planning for carry forward and setoff of
losses
 Claiming Chapter VI A deductions.

A presentation by Niranjan Swain,

OPGCL,Bhubaneswar
 Areas of Tax Planning – Capital Gain

 Short Term Vs. Long Term

 Capital Gain – Block of Assets
Tax Computation  Stamp Duty Valuation
 Obligation of Purchaser to deduct tax
at source.
 Deduction u/s 54 ……..

A presentation by Niranjan Swain,

OPGCL,Bhubaneswar
 Areas of Tax Planning – Capital Gain

Section Gain eligible for claiming exemption
. LT capital gain arising on transfer of
54
residential house property.
Long-term or short-term capital gain
54B
arising on transfer of agricultural land.
Long-term capital gain arising on
54EC
transfer of any capital asset.
Long-term capital gain arising on
54F transfer of any capital asset other than
residential house property.
Gain arising on transfer of land or
building forming part of industrial
54D
undertaking which is compulsorily
acquired by Government
A presentation by Niranjan Swain,
OPGCL,Bhubaneswar
Re-invested Asset for Exemption
Gain to be re-invested in purchase or
construction of residential HP.
Gain to be re-invested in purchase of
agricultural land.
Gain to be re-invested in bonds issued
by NHAI or by REC.
Net sale consideration to be re-
invested in purchase or construction
of residential house property.
Gain to be re-invested to acquire land
or building for industrial purpose.
Areas of Tax Planning – Capital Gain
Asset in which the capital gain is
.Section Gain eligible for claiming exemption to be
exemption
re-invested to claim

Gain arising on transfer of land, Gain to be re-invested to acquire

building, plant or machinery in order land, building, plant or machinery
54G
to shift an industrial undertaking in order to shift the industrial
from urban area to rural area undertaking

Gain arising on transfer of land, Gain to be re-invested to acquire

building, plant or machinery in order land, building, plant or machinery
54GA to shift an industrial undertaking in order to shift the industrial
from urban area to any Special undertaking from urban area to
Economic Zone any Special Economic Zone.

Long-term capital gain arising on

The net sale consideration should
transfer of residential property (a
be utilised for subscription in
54GB house or a plot of land). The transfer
equity shares in an “eligible
should take place during 1stApril,
company”.
2012 and 31st March 2017.

A presentation by Niranjan Swain,

OPGCL,Bhubaneswar
 Areas of Tax Planning – Other Sources

 Gift up to Rs.50,000/-
 Gift in cash/cheque/ draft
 Gift – immovable property
Tax Computation
 Gift of Movable Property
 Exemptions: Received from
 Relatives
 On the occasion of marriage of individuals
 By way of will / inheritance
 Contemplation of death of payer
 Local authority
 Charitable Institution registered u/s 12AA
 Fund / Foundation / University – Sec 10(23(C)

A presentation by Niranjan Swain,

OPGCL,Bhubaneswar
 Available deduction while computing Taxable Income.

SEC Applicability Nature of Amount of Deduction

Payment
80C Individuals Investments Max. - Rs. 1 .50 lakhs
80CCC Individuals LIC or Other Max.Rs.1.00 lakhs
Insurance
Pension Plan
80CCD Individuals Contribution to 80CCD(1): Employee’s
approved contribution 10% of salary (for
Pension Plan other than employee ,10% of
gross total income) or Rs.100,000
which ever is lower
80CCD(2):Employers contribution
up to 10% of salary.
Additional Contribution – Rs.0.50
lakhs
80CCE- Total of 80C + 80CCC+80CCD =Rs.1.50 lakhs + Addl.
Contribution Rs.0.50 lakhs u/s 80CCD
 . Available deduction while computing Taxable Income.

SEC Applicability Nature of Amount of Deduction

Payment/Receip
t
80CCG Resident Investments in 50% of amt invested
Individuals notified equity subject to maximum of
shares Rs.25000 for 3
consecutive A/Y.
80TTA Individuals Interest on Interest income or
deposits in saving rs.10000 whichever is less
a/c

80D Individuals Mediclaim policy Group 1(Assessee,

or contribution to Spouse , Dependent
central govt health Child):Rs.25,000(includin
scheme or g Preventive health check-
preventing health up)
check-up Super Senior Citizen –
Rs.30,000
 . Available deduction while computing Taxable Income.

SEC Applicability Nature of Amount of Deduction

Payment/Receipt

80DD Resident Expenditure on If General: Rs.75,000

Individuals handicapped If Severe Disability:
dependants Rs.1,25,000

80DDB Resident Expenditure on General :Actual or

Individuals specified diseases Rs.60,000 whichever is
less.
Senior Citizen: Actual
or Rs.80,000 whichever
is less.
80E Individuals Interest on Loan Any amount paid
taken for Higher
Education of self or
relative.
 Available deduction while computing Taxable Income.

SEC Applicability Nature of Amount of Deduction

Payment/Receipt

80G Individuals Donation 1.Unrestricted – 100%

or 50 % of donation.
2.Restricted -Max.
Limit upto. 10% Adjusted
Total Income
80GG Individuals Rent Payment (if no Maximum upto
HRA) Rs.24,000.

80GGC Resident Donation to Political Actual

Individuals Party or Electoral Amount(Contribution by
Trust. way of cash is not
eligible)
80U Handicapped Not Applicable General:
Resident Rs.75,000,
Individuals Severe Disability:
Rs. 1,25,000
 Areas of Tax Planning – Other Areas

 Disclose all incomes

Tax Computation  Avoid Concealment of facts
 Avoid attraction of Penalty

A presentation by Niranjan Swain,

OPGCL,Bhubaneswar
 Tax Planning - Compliances

 Maintenance of Accounts
 Audits / Tax Audits
 Certifications / Audit certificates
Tax Compliances
 Filing returns / forms promptly.
 Compliance with various
provisions of TDS/TCS.
 Filing Quarterly & Annual
returns of TDS.
 Reply to the Tax Authorities

A presentation by Niranjan Swain,

OPGCL,Bhubaneswar
 Areas of Tax Planning?

 Payment of Advance Tax

as per the stipulated
schedule.
Tax Payments
 Availing Tax Credit
 Carry forward of Tax
Credit
 Avoidance of Interest
 Avoidance of penalty
 Avoidance of Prosecutions
 Claim of Refund

A presentation by Niranjan Swain,

OPGCL,Bhubaneswar
A presentation by Niranjan Swain,
OPGCL,Bhubaneswar